Boosting enterprise in deprived areas has been a key goal of Gordon Brown’s Treasury. But the outcomes of these enterprise programmes have been mixed. Some have been shut down, because of poor targeting, like the exemption from stamp duty initiative, while others have had low take-up, such as community investment tax relief. Meanwhile, deprived areas have tended to stay deprived.

Targeting help

The Centre for Cities at the IPPR has been looking into this. Our City Markets report, published in June, looks at those deprived areas with very low levels of business activity. Some of these business-deprived areas are in London and the northwest, but most are in the north-east, in places like Sunderland. Until now, enterprise policy has assumed that all deprived areas need more business start-ups. But that may not be the case. A few deprived areas already have relatively high levels of business activity – such as Preston, Leeds and Camden. Start-ups are a key part of most vibrant economies, but do not generate that much new employment. Business-deprived areas will often need bigger interventions to boost demand for jobs and investment. So far, the Government has focused primarily on supply-side approaches in deprived areas, investing in welfare to work, workforce development and job-matching rather than in new job creation. In many parts of the country, this will be enough. But in businessdeprived areas with specific market failures, there is a need to stimulate more business activity.

Finding the root cause

Business-deprived areas are not all the same. Some suffer from local market failures, such as limited access to finance. Others face more fundamental problems such as population loss so each businessdeprived area needs to ascertain the root cause of low business activity. Business-led regeneration should focus most on those businessdeprived

areas that have specific problems. Doncaster, for example, could sustain more business activity as it has the advantage of very good rail and road connections. But areas like Easington face serious structural issues, as well as particular market failures. They may also be quite small and cut off from major urban centres, making the promotion of start-ups in such areas risky. This means that policy should first of all address the wider issues such as the after-effects of de industrialisation and population loss.

Tailored interventions

Other business-deprived areas, like Lewisham, have very few businesses – but they are part of wider labour markets and are effectively dormitory areas. Their residents generally commute out, and are able to find jobs in neighbouring areas which means there is a less pressing need for new business activity in Lewisham itself. City Markets calls for tailored interventions to boost demand in business-deprived areas, by attracting businesses and employment through interventions which are based on strong local market information. The Treasury is now looking at all this, as part of its Comprehensive Spending Review. It is aiming for fewer, more strategic, interventions. Less is definitely more in this case. That means fewer schemes and initiatives, but with more impact.